'You Can Enter But You Cannot Leave...' - U.S. Securities Markets and Foreign Firms
York University - Schulich School of Business
University of Alberta - Department of Finance and Statistical Analysis
While a number of prior papers have argued the benefits for foreign firms cross-listing their shares in the U.S., there is now a significant number of foreign firms exiting U.S. capital markets. This is occurring despite the difficulties foreign firms face in deregistering from the SEC. This paper examines the reasons underlying this trend. Overall, we find that the passage of the Sarbanes-Oxley Act and its enhanced corporate governance requirements has been a major motivation for foreign firms to exit. Moreover, we find firms with strong insider control are more likely to exit the U.S. market, as are those from countries where corporate governance tends to be relatively weak. Given the above, the paper suggests that legal bonding has not been a significant deterrent to foreign firm exit.
Number of Pages in PDF File: 44
Keywords: Sarbanes-Oxley Act, Deregistration, ADRs, Cross-listing, Foreign Firms, Voluntary Delisting
JEL Classification: G15, G18, G34, G38working papers series
Date posted: February 20, 2006
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